rate earned on common stockholders’equity

Dictionary of Accounting Terms for: rate earned on common stockholders’equity
rate earned on common stockholders’equity

ratio indicating the earnings on the common stockholders’ investment. It equals net income minus preferred dividends divided by average common stockholders’ equity. Assume net income of $50,000, preferred dividends of $10,000, and average common stockholders’ equity of $200,000. The ratio is 20% ($40,000/$200,000).

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